AMLA

AMLA Seminar for
Covered Persons
JERRY L. LEAL, CPA, MBA, CSEE
Manager Inspection Group
Integrated Supervision Department I
Module 1: Introduction/Amendments
to AMLA
Module 2: Updated AML Rules &
Regulations and AML Risk Rating
System (ARRS)
Module 3: Covered Transaction &
Suspicious Transaction Reporting
and AMLC Registration
2
Module 1 Introduction/Amendments to AMLA

LEARNING OBJECTIVES:
To be able to explain the functions of AMLC
To be able to explain the functions of
AMLSG
To be able to explain the
Definition/Elements/Stages of Money
Laundering
To be able to identify the different ML
offenses
To be updated on the latest Amendments
to AMLA
Anti-Money Laundering
Council (AMLC)
Financial Intelligence Unit of the
Philippines.
Created by virtue of R.A. No. 9160
(Sec. 7).
BSPGovernor
Governor
BSP
Composition Chairman
Chairman
SEC
SEC
Chairperson
Chairperson
Member
Member
ICIC
Commissioner
Commissioner
Member
Member
4
AMLC Secretariat
EXECUTIVE
DIRECTOR
MEMBERS
5-year term
at least 35 years old
Member
of
the
Philippine Bar
good moral
character,
unquestionable
integrity
served
for atprobity.
least
and known
5
years in BSP, SEC, or
IC.
hold
full-time
5
permanent positions
AMLC Secretariat
Table of Organization
Executive Director
Technical Staff
Compliance and
Investigation Group
Legal and
Evaluation Group
Information
Management and
Analysis Group
Administrative and
Finance Unit
AMLC Functions
Requires submission of CTRs or STRs
Issues orders to supervising authority or
covered institutions
Institutes legal proceedings through the
OSG
Cause the filing of complaints with DOJ or
Ombudsman
Investigates STs and CTs deemed suspicious
Applies before Court of Appeals, ex parte,
for a freeze order
AMLC Functions
Implements measures to counteract
money laundering.
Receives and takes action on requests
from foreign states for assistance
Develop educational programs on ML
Enlists
the
assistance
of
other
government agency.
Imposes administrative sanctions
Examines or inquires into deposits or
investments, including R/A, upon order of
the court.
8
Sec. 9(c) Reporting of Covered and

Suspicious Transactions to the AMLC
(w/o Court Order)
Covered persons shall report to the

AMLC all covered transactions and suspicious
transactions .
When reporting covered or suspicious
transactions to the AMLC, covered persons and
their officers and employees shall not be
deemed to have violated R.A. No. 1405, as
amended, R.A. No. 6426, as amended, R.A.
No. 8791 and other similar laws,
x x x.
9
Sec. 11 - AMLC Authority to

Inquire With or Without Court
Order
Notwithstanding the provisions of R.A. No.
1405, as amended, R.A. No. 6426, as amended,
R.A. No. 8791, and other laws.
The AMLC may inquire into or examine any
particular deposit or investment, with any
bank or non-bank financial institution, including
related accounts upon order of the Court of
Appeals based on an ex parte application when
there is probable cause that they are related to
an unlawful activity.
10

Order
No Court Order needed in cases where
the unlawful activity involves Kidnapping
for Ransom (KFR), drug-related cases
and terrorist-financing cases under
R.A. 10168
AMLC Resolution
Court Order
KFR
Other Unlawful
Drug-related
Activities under
Terrorist Financing
Sec 3(i) of the AMLA
under R.A. 10168
11

Order
Court of Appeals shall act on
the application to inquire within 24
hours from filing
To ensure compliance with AMLA,
the Bangko Sentral ng Pilipinas
(BSP) may, in the course of a
periodic or special examination,
check the compliance of a covered
person with the requirements of the
AMLA and its implementing rules and
regulations.
12

Order
Related Accounts accounts, the funds and
sources of which originated from and/or
materially linked to the monetary instrument(s)
or property(ies) subject of the freeze order
Court order ex parte needed same
procedure as in the principal account
Authority to inquire into or examine principal
account and its related accounts shall
comply with Art. III, Sections 2
(Unreasonable search & seizure) and 3
13
(Inadmissible evidence) of the 1987
Sec. 10 Freezing of
Monetary Instrument or
Property
Freeze Order (FO)
Issued by the Court of Appeals within 24
hours from filing of a verified application ex
parte by the AMLC and after determination
that probable cause exists that any
monetary instrument or property is in any
way related to an unlawful activity
Effective immediately
Period: not exceeding six (6) months
14
Sec. 10 Freezing of
Monetary Instrument or
Property
No case filed against person whose

account has been frozen = FO deemed
ipso facto lifted
A person whose account has been frozen

may file a motion to lift the freeze
order and the CA must resolve this
motion before the expiration of the FO
No court shall issue a Temporary
Restraining Order (TRO) or a writ of
injunction against any freeze order,
except the Supreme Court
15
AMLC Authority to Freeze

under TF & Suppression Act
(R.A. 10168)
AMLC is authorized to issue a Freeze Order ex
parte against property of funds related to
Financing of Terrorism or Acts of Terrorism
Period of Effectivity:
General Rule: Twenty (20) days extendible
to a maximum period of six(6) months
Exception: Designated organization,
group, association or individual under UN
Security Resolution No. 1373 effective
until basis for listing is lifted
16
Duty of Covered Persons

upon receipt of Freeze
Order
Immediately
freeze
the
monetary
instrument or property and related web of
accounts;
Within 24 hours, Covered Persons shall
submit to the Court of Appeals and the AMLC,
by personal delivery, a detailed written
return on the freeze order
Account numbers
Name(s) of account holders
Amount
Other relevant information
Time
17
Money Laundering
Offenses / Penalties
1.Knowingly
transacting,
converting,
transferring,
disposing,
moving,
acquiring,
possessing, using, concealing or
disguising the MI/P or attempting
or conspiring to commit ML (The
money launderer himself)
Penalty
.7 to 14 years imprisonment
.Fine: not less than P 3 Million but
not more than 2x the value of the
MI/P
18
Money Laundering
2. Knowingly
aiding,
abetting,
assisting or counseling ML or
performing or failing to perform an
act as a result of which he
facilitates the offense of ML
(The person who assists the
money launderer)
Penalty
.4 to 7 years imprisonment
.Fine: not less than P1.5 Million but
not more than P3 Million.
19
Money Laundering
3. For knowingly failing to
report
covered
and
suspicious transactions
to the AMLC
Penalty
. 6
months
to
4
years
imprisonment
. Fine: not less than P100,000.00
but
not
more
than
P500,000.00,
20
Money Laundering
Covered
Person,
its
directors,
officers
and
personnel
who
knowingly
participated in the commission of
the crime of ML:
Penalty
4 years to7 years
imprisonment
Fine: not more than 200% of
the value of the MI/P laundered
21
Other Offenses under

the AMLA, as amended
1. Failure to keep records
Records of all transactions of
covered persons
Maintained and safely stored
for five (5) years from date of
transaction/closure.
Penalty
6
months
to
1
year
imprisonment
Fine:
not
less
than
P100,000.00 but not more
than P500,000.00
22
Other Offenses under

the AMLA, as amended
2. Malicious Reporting
Reporting or filing a completely
unwarranted or false information relative to
money laundering transaction against any
person
Penalty
6 months to 4 years imprisonment
Fine: not less than P100,000.00
but not more than P500,000.00;
Offender not entitled to the
benefits of the Probation Law.
23
3. Breach of
Confidentiality
Covered persons and their officers and
employees are prohibited from:
communicating directly or indirectly,

in any manner or by any means,
to any person or entity, the media,
the fact that a covered or suspicious
transaction report has been reported or
is about to be reported, the contents
thereof, or any other information in
relation thereto.
Neither may such reporting be published or aired

in any manner or form by the mass media,24e-mail or
other similar devices.
Penalty
3 to 8 years imprisonment
and a fine of not less than
P500,000.00 but not more
than P1.0 Million.
concerned
officer
and
employee of the covered
person and media (the
responsible
reporter,
writer,
president,
publisher, manager and
editor-in-chief) shall be
25
Specialist Group
Part of the reorganized SES
under MB Res. No. 1443
dated 13 December 2007.
Created to address the need
for technical expertise in the
supervision
of
AML
Compliance
of
covered
institutions.
Technical unit in SES that specializes in the
review and assessment of the AML framework of
covered institutions.
26
AMLSG Table of
Organization
Deputy Governor (SES)
Managing Director (SES III)
Deputy Director and Group Head
Group Secretary
ASO II
Manager
Assistant Manager
Bank Officers
SE Specialist I
2
7
AMLSG Core Functions

On Site Examination
Off Site Supervision
Develop AML Policies and
Guidelines
Conduct AML Trainings and
awareness Seminars
Other tasks assigned by
BSP Top Management
2
8
What is Money
Laundering (ML)?
In laymans term
is an act to disguise dirty
money
(criminal
proceeds)
as
clean
money
(legitimate
earnings/lawful income)
to launder means to
wash
Cleaning dirty money
30
Definitions of Money
Laundering
processing
processing of
of criminal
criminal
proceeds
proceeds in
in order
order to
to
disguise
disguisetheir
theirillegal
illegalorigin
origin
legitimization of proceeds
legitimization of proceeds
of
specified
unlawful
of
specified
unlawful
activity
activity
crime
whereby
the
crime
whereby
the
proceeds
proceeds of
of an
an unlawful
unlawful
activity
activity are
are transacted
transacted
thereby
making
them
thereby
making
them
appear
appear to
to have
have originated
originated
from
from legitimate
legitimate sources
sources
31
Illustration of Money
Laundering
32
Elements of the Crime of

Money Laundering
Monetary
Monetaryinstrument
instrument
or
orproperty
property(MI/P)
(MI/P)from
from
an
anunlawful
unlawfulactivity
activity
Transaction/Attempted
Transaction/Attempted
transaction
transactionof
ofMI/P
MI/P
Knowledge
Knowledgethat
thatthe
the
MI/P
MI/Prepresents,
represents,
involves,
involves,or
orrelates
relatesto
to
the
theproceeds
proceedsof
ofthe
the
unlawful
unlawfulactivity
activity
33
Definition of Terms
Proceeds not limited to those
realized/ derived from the unlawful
activity.
Transaction refers to any act

establishing any right or obligation. It
also includes any movement of funds by
any means with a covered institution.
34
Why is money
laundering a problem
Undermines
Undermines financial
financial institutions,
institutions,
social,
social,economic
economicand
andpolitical
politicalstructure
structure
of
ofaasociety
society
Stifles
Stiflescompetition
competition
Contamination
Contamination effects
effects on
on legitimate
legitimate
transactions
transactions
Finances
Financesterrorist
terroristactivities
activities
35
Financial Action Task

Force (FATF)
FATF 40 Recommendations
Non-Cooperative Countries and

Territories (NCCT) List (2000-2006)
International Cooperation Review
Group (ICRG)
List of Vulnerable
Grey List
Dark Grey List
Black List
Jurisdictions
36
Stages
1. Placementinitial
placement or introduction
of the illegal funds into
the financial system.
Banks and other financial
institutions usually used
at this point.
Examples -
smurfing or structuring
converted into financial
instruments
commingled with
legitimate funds
purchases of insurance
contract
Stages
2.
Layering
series of
financial
transactions
wherein the dirty money is
passed through a series of
procedures, putting layer
upon layer of persons and
financial activities into the
laundering process.
Examples:
electronic transfer of funds
disguise the transfer as a
payment for goods or
services
transfer the funds to shell
corporation
Stages
3.
Integration
The
money is once again made
available to the criminal
with the occupational and
geographic origin obscured
or
concealed.
The
laundered funds are now
integrated back into the
legitimate
economy
through the purchase of
properties, businesses and
other investments.
MONEY LAUNDERING SCHEME IN THE

PHILIPPINES
41
The AML Act and its

Amendments
R.A. No. 9160 - Effectivity: 17 October
2001
R.A. No. 9194 (amendatory law) Effectivity: 23 March 2003
R.A. No. 10167 (amendatory law)
Effectivity 6 July 2012
Revised Implementing Rules and

Regulation -Effectivity 16 September 2012
R.A. No. 10365 (amendatory law) 4
Effectivity 7 March 2013
2
Salient Features
1. Criminalizes money
laundering.
2. Creates a financial
intelligence unit or
implementing agency.
3. Imposes requirements re:
customer identification,
record-keeping and
reporting of covered and
suspicious transactions.
43
Salient Features
4. Relaxes strict bank
deposit secrecy laws.
5. Provides for freezing/
seizure/forfeiture/
recovery of dirty
money/property.
6. Provides for
international
cooperation.
44
R.A. No. 10167

Court
Courtof
of
Appeals
Appeals
shall
shallact
acton
on
the
the
application
application
for
forFreeze
Freeze
Order
within
Order within
24
24hours
hours
from
fromfiling.
filing.
Only
Onlythe
the
Supreme
Supreme
Court
Courtcan
can
issue
issueaa
TRO
TRO or
or
writ
of
writ of
injunction.
injunction.
AMLC
AMLCmay
may
inquire
inquireor
or
examine
examine
deposits
or
deposits or
investments,
investments,
including
including
related
related
accounts
accountsbased
based
on
onex
exparte
parte
application.
application.
4
5
RELATED ACCOUNTS under the

RIRR of the AML Act, as amended
by RA No. 10167
Related Accounts are accounts where:
The funds and sources originated from the
monetary instruments or properties subject
of the F/O; and/or
The funds and sources are materially-linked
to the monetary instruments or properties
subject of the freeze order.
46
MATERIALLY-LINKED ACCOUNTS
All accounts or monetary instruments
belonging to the same person whose
accounts,
monetary
instruments
or
properties are the subject of the F/O;
All accounts or monetary instruments held,
owned or controlled by the owner or holder
of the accounts, monetary instruments or
properties subject of the F/O, whether such
accounts are held, owned or controlled
singly or jointly with another person;
47
All accounts or monetary instruments the
funds of which are transferred to the
accounts,
monetary
instruments
or
properties subject of the freeze order
without any legal or trade obligation,
purpose or economic justification;
All In Trust For accounts where the
person
whose
accounts,
monetary
instruments or properties are the subject of
the freeze order is either the trustee or the
trustor;
48
All accounts held for the benefit or in the
interest of the person whose accounts,
monetary instruments or properties are the
subject of the F/O;
All accounts or
monetary instruments
under the name of the immediate family or
household members of the person whose
accounts,
monetary
instruments
or
properties are the subject of the F/O:
if the amount or value involved is not
commensurate with the business or financial
capacity of the said family or household member;
49
All accounts of corporate and juridical
entities that are substantially owned,
controlled or effectively controlled by the
person
whose
accounts,
monetary
instruments or properties are subject of the
F/O;
All shares or units in any investment
accounts and/or pooled funds of the person
whose accounts, monetary instruments or
properties are subject of the F/O; and
50
All other accounts, shares, units or
monetary instruments that are similar,
analogous or identical to any of the
foregoing.
51
Amendments - RA No.
10365
Expands
Expands
the
the
definition
definition
of
ofmoney
money
launderin
launderin
ggas
asaa
crime
crime
Covers
more
Covers more
predicate
predicate
crimes
crimes(14
(14
to
to34)
34)now
now
includes
includes
environment
environment
alalcrimes.
crimes.
Expands
Expands
coverage
of
coverage of
Covered
Covered
Persons
Persons
52
Salient Features RA No.

10365
Effectivity
Effectivityof
of
Freeze
Order
Freeze Order
max
maxof
of66
months
months
Land
Land
Registration
Registration
Authorities
Authorities
and
andRegistries
Registries
of
Deeds
are
of Deeds are
required
requiredto
to
submit
submitCTRs
CTRs
53

10365
Introduced
Introduced
forfeiture
forfeitureof
of
equal
value
equal value
to
tothat
thatof
ofthe
the
proceeds
proceedsof
of
unlawful
unlawful
activity
activity
Imposed
Imposedmonetary
monetary
and
andcriminal
criminalpenalty
penalty
on
onCovered
CoveredPersons,
Persons,
its
directors,
officers
its directors, officers
or
orpersonnel
personnelwho
who
knowingly
knowingly
participated
participatedininthe
the
crime
crimeof
ofmoney
money
laundering
laundering
54

10365
Includes
Includes
AntiAntidiscriminat
discriminat
ory
ory
provision
provision
Extended
Extended
deadline
deadlineof
of
reporting
reporting
CTs
CTsand
andSTs
STs
from
from10
10to
to
15
15days
days
Prohibited
Prohibited
interventio
interventio
nnininthe
the
BIR
BIRaffairs
affairs
55
Money Laundering Offense

and Penalties
WHO: Any person, knowing that any MI or property

represents, involves, or relates to the proceeds of
any unlawful activity;
HOW:
a. Transacts MI or Property;
b. Converts, transfers, disposes of,
moves, acquires, possesses or
c. Conceals
or disguises the true
uses MI/P;
nature, source, location,
disposition, movement or
ownership or rights with respect to
d. Attempts
the MIP; or conspires to commit
money laundering offense referred
to in Par. a c.
PENALTY
7 to 14 yrs.
imprisonmen
t and a fine
of not less
than P3M but
not more
than 2X the
value of the
MI/P.
56

and Penalties
WHO: Any person, knowing that any MI or

property represents, involves, or relates to the
proceeds of any unlawful activity;
HOW:
e. Aids, abets, assists in or counsels

the commission of the money
laundering offenses referred to in
paragraph a to c; and
f. Performs or fails to perform any act
as a result of which he facilitates the
offense
of
money
laundering
referred to in paragraphs a to c.
PENALTY
4 to 7 years
imprisonmen
t and a fine
of not less
than P1.5M
but not more
than P3M.
57

and Penalties
OFFENS
E
Covered
persons,
its
directors,
officers
or
personnel who knowingly
participated
in
the
commission
of
money
laundering
PENALT
Y
4
to
7
years
imprisonment and a
fine corresponding to
not more than 200
percent of the value
of
the
MI
or
property laundered.
58
Unlawful Activity
(Predicate Offense)
Any act or omission or series or

combination thereof involving or having
direct relation to the following:
Kidnapping for ransom;
Drug Trafficking and other violations
of the Comprehensive Dangerous
Drugs
ActCorruption
of 2002; (RA No. 3019, as
Graft and
amended)
Plunder (R.A. No. 7080, as amended)
Robbery and extortion under the RPC
Jueteng and Masiao (PD 1602)
Piracy (RPC & PD 532)
59
Unlawful Activity (Predicate

Offense)
Qualified Theft under Art. 310, RPC, as
amended
Swindling under Art. 315, RPC

Smuggling under RA Nos. 455 & 1937
Violations of Electronic Commerce Act of
2000
(RA No. 8792)
Hijacking, destructive arson and murder,
including those perpetrated by terrorists
against non-combatant persons and
similar targets.
Terrorism and conspiracy to commit
terrorism
(RA No. 9372);
60

Offense)
Financing of Terrorism and other
offenses (RA No. 10168);
Bribery and corruption of Public

Officers, RPC, as amended;
Frauds and Illegal Exactions and
Transactions, RPC, as amended;
Malversation of public funds and
property, RPC, as amended;
Forgeries and Counterfeiting, RPC,
as amended;
Violations of Sections 4 to 6, The
Anti-Trafficking in Persons Act (RA
No. 9208);
6
1

Offense)
Violations of Sections 78 to 79 of Chapter
IV,
The Revised
Violations
of Forestry
SectionsCode
86 to(PD
106
No.
of705);
Chapter
VI,
The Philippine Fisheries Code of 1998 (RA
No.
Violations
8550);of Sections 101 to 107, and 110,
The Philippine Mining Act of 1995 (RA No.
7942);
Violations of Section 27, The Wildlife
Resources Conservation and Protection Act
(RA No. 9147)
Violation of Section 7(b), The National
Caves and Cave Resources Management
Protection Act (RA No. 9072);
62

Crimes)
Violation of The Anti-Car napping Act of 2002,

RA No. 6539
Violations of Sec. 1, 3 and 5, PD No. 1866
Violation of The Anti-Fencing Law, PD No. 1612
Violation of Sec. 6, The Migrant Workers and
Overseas Filipinos Act of 1995, RA No. 8042, as
amended;
Violation of The Intellectual Property Code of
the Philippines, RA No. 8293;
Violation of Sec. 4 of The Anti-Photo and Video
Voyeurism Act of 2009, RA No. 9995;
63

Crimes)
Violation of Section 4, The AntiChild Pornography Act of 2009,
RA No. 9775
Fraudulent practices and other
violations of The Securities
Regulation Code of 2000, RA No.
8799
Violations of Sections 5, 7, 8, 9, 10(c), (d), and
(e), 11, 12 and 14 of The Special Protection of
Children against Abuse, Exploitation and
Discrimination, RA No. 7610
Felonies or offenses of a similar nature that are
punishable under the penal laws of other
countries
6
4
Covered Persons
Jewelry
dealers
in
precious
metals
or
Jewelry dealers in precious metals or
stones
stones
Persons
Personswho
whoprovide
provideservices
services**
Company
Companyservice
serviceproviders
providers
Excludes lawyers and accountants who act as

independent professionals in relation to
information on clients or where disclosure of
Information
would
compromise
client
confidences or the attorney-client relationship.
65
Freeze Orders (FO)

Verified ex-parte petition filed to
CA;
CA to act on the petition within 24
hours;
Immediately effective not
exceeding 6 months;
Ipso facto lifted if no case is filed;
Motion to lift FO to be resolved
before expiration of the FO; and
Only SC can stop implementation
of FO.
66
The Updated AML Rules and

Regulations (UARR) & AML
Risk Rating System (ARRS)
Module 2
Learning Objectives
Give an overview of the important
features of the UARR;
Define a sound AML Risk Management
System;
Discuss the salient provisions of the UARR
on:
Know-Your-Customer (KYC) Process;
Covered and Suspicious Transactions
Reporting;
Record keeping and retention; and
AML Training Program.
Know
the
enforcement
actions
69
for
Legal Basis of UARR

Rule
17.b
of
the
Revised
Implementing Rules and Regulations
(RIRR) of the AMLA, as amended by
R.A. No. 10167.
70
Policy Objective
Protect and preserve the integrity

and confidentiality of accounts
Ensure that the Philippines shall

not be used as a money
laundering site
71
Salient Features of UARR

Single AML Rules for BSP supervised and
regulated Covered Persons
Applies to all Covered Institutions
supervised and regulated by BSP
Defines a Politically Exposed
Person or PEP
7
2

Enumerated the Basic Principles and
Policies to Combat Money Laundering
Designated the BOD as ultimately
responsible for AML compliance
Defined the role of the Compliance
Office in the Money Laundering
and Terrorist Financing prevention
7
3

Created the position of an AML Officer
and expanded the responsibilities of the
Compliance Office
Prescribed the minimum contents of the
Money
Laundering
and
Terrorist
Financing Prevention Program
7
4

Defined Internal Audits role vis--vis the
Compliance Office relative to AML
compliance
Required a risk-based and
customer identification process
tiered
Prescribed guidelines when applying

Enhanced Due Diligence and
Reduced Due Diligence
7
5

Provided exceptions to the
Face-to-Face Requirements
Added other acceptable IDs
Included Financial Inclusion Advocacy
Provisions
76

Required the updating of KYC documents
Required originator information on wire
transfers and prescribed procedures when
a wire transfer is unaccompanied by
originator information
Identified Covered Transactions that are
subject to deferred reporting
77

Required an annual AML Training Program
with various focuses for various officers
and staff
Prescribed enforcement actions against
the BOD, Senior Management and Line
Officers
78
A.RISK MANAGEMENT (Sec.

X805 )
Develop
a
sound
risk
management policies and
practices
Identify, assess, monitor, and
control money laundering risks
Ensure effective implementation of the
UARR
END GOAL: CIs shall not be used
as a vehicle to legitimize proceeds
of unlawful activity or to facilitate
or finance terrorism.
79
Areas
A.
RISK MANAGEMENT
of
BOD and SM
Oversight +
Sound
Compliance Office
Risk
MLPP
Mgt.
Practic COVEREDMonitoring and
es
PERSONReporting Tools
Internal Audit
80
A. RISK MANAGEMENT
BOD and SM Oversight (
X805.1.a)
Responsible for AML
Compliance
Ensure that
oversight on the
institutions
compliance
management is
adequate
81
A. RISK MANAGEMENT
Functions of Compliance
Office
(
X805.1.a)
Manage the implementation of the MLPP
Ensure compliance by all responsible
officers and employees
Conduct periodic compliance checking
Evaluate existing processes, policies
and procedures
8
2
A. RISK MANAGEMENT
Functions of Compliance
Office
( X805.1.a)
Immediately
correct infractions
Inform officers and employees
of BSP/AMLC issuances
Alert SM, BOD, or committees of failure

to address AML and TF issues
Organize timing and content of AML
training including refresher trainings 8
3
A. RISK MANAGEMENT
MLPP ( X805.2.)
Comprehensive and risk-based
Geared toward the promotion of high
ethical and professional standards
Consistent with the AMLA, as amended
Designed according to institutions corporate
structure and risk profile
In writing and approved by the BOD
84
A. RISK MANAGEMENT
MLPP (Subsection X805.2.)
Institution-wide/consolidated for covered
institutions with branches, subsidiaries,
affiliates abroad
Readily available in userfriendly form
Well disseminated to officers
and staff
Contains an audit trail on
the dissemination
process
85
A. RISK MANAGEMENT
MLPP-Minimum Contents
X805.2)
Procedures on customer identification

process, record keeping and retention, CT
and ST reporting
AML Training Program to all Directors and
responsible
officers
and
employees
including refresher courses
Know Your Employee process
8
6
A.
RISK
MANAGEMENT
MLPP - Minimum
Requirements ( X805.2)
Internal Audit System
Independent audit program
Mechanism for immediate correction of
deficiencies
Cooperation with AMLC
Designation of an AML Compliance
Officer
87
A.
RISK
MANAGEMENT
Revised and Updated
MLPP ( X805.2.a)
One-time
submission
of
a
Sworn
Certification that the revised MLPP was
prepared, and approved by the BOD
Regular updating at least once every 2
years
Revision or update to be
approved by the BOD
8
8
A.
RISK
MANAGEMENT
Monitoring and Reporting Tools
( X805.3.)
Appropriat
e to riskprofile and
business
complexit
y
Capable of
generating
timely,
accurate
and
complete
reports
Must
regularly
apprise
BOD/SM of
AML/TF
complianc
e
8
9
A. RISK MANAGEMENT
Monitoring and Reporting Tools

( X805.3.)
a. For Universal Banks and
Commercial Banks (
X805.3.a)
Electronic
Contains functionalities
mentioned in Subsection
X807.2
b. Other CIs Manual
monitoring (Subsection
X805.3.b.)
9
0
A. RISK MANAGEMENT
Internal Audit (IA) Function (

X805.4.)
Periodic and independent
evaluation of the risk
management system
Degree of adherence to internal
control mechanisms
Adequacy and effectiveness of
other internal controls
UBs and KBs: Efficiency of the
electronic monitoring systems
functionalities
9
1
A. RISK MANAGEMENT
Results of Internal Audit (

X805.4)
Timely communicated to the BOD
Open for scrutiny by BSP examiners

Promptly communicated to the CO for
appropriate corrective action
CO regularly submit reports to the BOD
9
2
B. CUSTOMER IDENTIFICATION
PROCESS
(Section X806)
System to verify:
true identity of customers
legal
existence/organizational
structure of juridical entities
authority/identification of all persons
purporting to act on their behalf
9
3
B.CUSTOMER IDENTIFICATION
PROCESS
(Section X806)
Risk-based and tiered:

customer acceptance
customer retention
customer due diligence (CDD)
Reduced CDD Low risk clients
Average CDD Normal or Medium risk
Enhanced CDD High risk accounts
9
4
Customer Acceptance Policy (
PROCESS
X806.1)
Clear, written, and graduated

Financially or socially
disadvantaged are not denied
access to financial services
Criteria for type of customers
Standards for applying reduced,
average and enhanced due diligence
Documentation on risk profiling and
standard of customer due diligence
9
5
PROCESS
Criteria
for type of customers
( X806.1.a.)
Low, normal and high risk.
Standards for applying reduced, average
and enhanced due diligence.
Documentation on risk profiling
and the standard of CDD applied.
9
6
PROCESS
Customer Acceptance Policy
Design
FACTORS TO CONSIDER:
Background and source of funds
Country of
operations
origin
and
residence
or
Public or high profile position of

customer or its directors/trustees, SHs,
officers
and/or authorized signatory
97
linked accounts
PROCESS
Customer Acceptance Policy
Design
FACTORS TO CONSIDER:
Watchlist of individuals and
entities (OFAC, BSP/AMLC
Circulars, International
Organizations)
Business activities
Type of services/products/
transactions to be entered w/
CI
98
PROCESSDue
Customer
Diligence
Reduced Due Diligence - Low
Average Due Diligence - Normal
Enhanced Due Diligence - High
99
PROCESS
Reduced
Due Diligence
(X806.1.d)
For customers assessed to be of low risk

Low Risk Individual Customers
With regular employment or
economically productive activity
Small account balance and transactions
Resident in the area of the CIs office or
branch
100
PROCESS
Reduced
Due Diligence
(X806.1.d)
Low Risk Entities:

Banking institutions
Trust entities
Quasi-Banks authorized by BSP
Publicly listed companies
Government agencies, GOCCs
101
PROCESS
Reduced
Due Diligence
(X806.1.d)
Individual Customers
Defer acceptance of the min. info
Obtain information numbers 1 to 7 at
time of account opening
Info nos. 8-11, may be obtained w/in
reasonable time but not exceeding 90
days from account opening
102
PROCESS
Reduced
Due Diligence
(X806.1.d.)
Corporate,
Partnership,
sole
proprietorship entities, banks, trust
entities, quasi-banks, publicly listed
companies, government agencies:
Only Information Number 4 may be obtained
at the time of account opening
103
PROCESS
Average
Due Diligence
(X806.2.a.)
Obtain upon account opening or before

establishing business relationship all
minimum information
Confirm these information
identification documents
with
valid
104
PROCESS
Enhanced Due Diligence
(X806.1.b.)
Apply to customers that are assessed as

HIGH RISK
Monitor customers transactions
Obtain additional information
Conduct validation procedures
Obtain senior management approval
105
PROCESS
High Risk Customers
(X806.2.m.)
Customer from a country with :

Inadequate AML standards
Does not sufficiently apply regulatory
supervision or the FATF recommendations
Presents greater risk for crime, corruption
or TF
106
PROCESS
High
Risk Customers X806.2.m.
Take extreme caution and vigilance in its
dealings.
In no case
will reduced diligence be
applied.
Secure the approval of
senior
officer
in
accepting a high risk
customer in all instances
107
PROCESS
High
Risk Customers X806.2.l.
A covered institution shall require their customers
who are foreign exchange dealers, money
changers and remittance agents to submit a copy
of the certificate of registration issued to them by
the BSP as part of their customer identification
document. The certificate of registration shall be
for each head office, branch, agent, sub-agent,
extension office or business outlet of foreign
exchange dealers, money changers and
remittance agents.
Foreign exchange dealers, money changers and
remittance agents customers presenting greater
108
risk, such as shell companies shall be subject to
PROCESSDue Diligence
Enhanced
(X806.1.b.)
Obtain additional information
Individuals
List of other Banks
List of companies (DOS)
List of banking services
Corporate or Juridical Entity
Bank references
KYC information and IDs of primary
officers, SHs (2%) and Directors
109
PROCESS
Enhanced
Due Diligence
(X806.3.a.)
In the course of customer account or

transaction monitoring:
Raises doubt on the info or document
provided or the ownership of the entity
Any of the circumstance for the filing of a
STR exists
Justifies reclassification to
high risk
110
PROCESS
Minimum Validation Procedures
(X806.1.c) Individual
Confirm DOB versus duly authenticated
official document.
Verify the permanent address.
Contact by phone, e-mail or TY letters.
Determine authenticity of the IDs.
111
PROCESS
Minimum Validation Procedures
(X806.1.c) Corporate
Require submission of audited financial
statements
Inquire status from supervising authority
Obtain bank references
On-site visitation
Contact by phone, e-mail or TY letters
112
PROCESSDue Diligence
Enhanced
(X806.1.b.)
Additional information cannot be obtained.

Information or document provided is false.
Result
of
validation
process
is
unsatisfactory.
DENY relationship
113
PROCESS
Face
to Face Contact (
X806.1.e)
General Rule: No new accounts shall be

opened and created w/o face-to-face contact
and personal interview.
Exceptions: ( X806.1.e.1
e.2)
1. Account opened through a

trustee, nominee, agent, or
intermediary.
2. Outsourcing arrangement.
3. Third Party Reliance.
114
PROCESS
1.Account
opened through a
trustee, nominee, agent, or
Establish
and record (
true
intermediary
X806.1.e.1)
and full identity
existence of BOTH:
and
trustee,
nominee,
agent or intermediary.
trustor,
principal,
beneficial owner, or
person on whose behalf
account
is
being
opened.
Determine the true

nature of the parties
capacities and duties.
Apply criteria for
assessing risk profile
and standard of due
diligence.
115
2.PROCESS
Outsourcing arrangement (
X806.1.e.2.)
Face-to-face contact may be outsourced to

a counter-party
Without prior MB approval
May be a CI or non- CI
formally documented
conditions under Subsection X806.2.d.
are met
Subject
to
outsourcing
existing
rules
on
116
PROCESS for Outsourcing:
Conditions
Counterparty is a Covered Institution
(CI)
Written service level agreement

Reliable
and
acceptable
customer
identification
system
and
training
program
IDs and other documents turnover
within a period not > 90 calendar days to
the CI for review and risk assessment
PROCESS for
Conditions
Outsourcing: Counterparty is a
Non Covered Institution
All conditions for CI counterparty
Employees have similar training program
Annual monitoring and review by the CI of
the performance of the counterparty
118
PROCESS
Third
Party Reliance (
X806.1.e.3)
If a third party has conducted the face-toface contact:

On its own customer
Referred to a CI
The CI may rely on the
face-to-face contact of
the third party.
Provided that the pertinent requirements
in
X806.2.e.1. are also met.
119
PROCESS
Third
Party Reliance (
X806.2.e.1)
Covered Institutions may rely on the

customer identification process undertaken
by third party, defined as:
Covered Institution.
Financial institution operating abroad.
120
PROCESS
Third Party is a CI (
Covered Institutions shall obtain from the
X806.2.e.1.a)
3rd
PARTY
a
written
sworn
certification containing the following:
3rd Party conducted customer
identification
processes
in
1
accordance w/ the UARR and its
own
MLPP
plus
face-to-face
requirement.
The relying CI has the ability to
obtain
identification documents
2
from the 3rd Party upon request
w/out DELAY.
121
PROCESS
Third
Party is a FI operating
Abroad
1. Apply all contents

certification.
required
in
sworn
2. Laws of country where 3RD PARTY is

operating has equal or more stringent
customer
identification
process
requirement.
3. Has not been cited in violation thereof.
4. Obtain approval from SM.
122
PROCESS
New
Individual Customers and
Authorized Signatories (Subsection
X806.2.a.)
1. Name
2. Present address
3. Date and place of
birth
5. Source of funds
6. Permanent
address
7. Nationality
4. Nature of work, name 8. TIN, SSS, or GSIS

of employer or nature
9. Contact details
of self
-employment/busines 10.Specimen
Signature
s
11.Name, address, date and place of birth, nature of
work and source of funds of beneficial owner1or

beneficiary if applicable
2
PROCESS
New
Corporate/Juridical Entities
(X806.2.b.)
Develop a systematic procedure to identify

the entity.
Open and maintain accounts in the true and
full name of the entity
Ensure that the entity has not been, or is not
in the process of being dissolved, struck-off,
wound-up, terminated or otherwise placed
under receivership or liquidation
124
New
PROCESS
(X806.2.b.)
1
2
3
4
Certificates of Registration (DTI,SEC,BSP);

Articles of Incorporation or Association and
By-Laws;
Principal business address;
Board or Partners Resolution duly certified
by the Corporate/Partners Secretary
authorizing the signatory to sign on behalf of
the entity
Latest General Information Sheet (List of
names of directors/trustees/partners and
principal stockholders owning at least 20%;
primary officers
1
2
PROCESS
New
(X806.2.b.)
6
7
8
9
Contact number of the entity and authorized

signatory/ies
Source of funds and nature of business;
Name, present address, date and place of

birth, nature of work and source of funds of
beneficial owner or beneficiary, whenever
applicable;
For entities outside the Philippines similar
documents duly authenticated by the
Philippine Consulate where said entities are
registered
126
PROCESS
Valid
Identification Documents
(X806.2.c)
For all types of financial transactions.

Financial transactions involving OFWs.
First time to engage in a financial
transaction:
Present original and submit a clear copy of at

least (1) valid photo-bearing ID document
issued by an official authority.
127
PROCESS
Official Authority
Government of the Republic of the

Philippines
Its political subdivisions and
instrumentalities
Private entities/institutions
GOCCs
registered with,
supervised by or regulated
by the BSP, SEC or IC
1
2
PROCESS
Valid IDs ( X806.2.c)
Passport (local and
foreign)
Drivers license
PRC ID
NBI clearance
Police clearance
Postal ID
Voters ID
129
PROCESS
Valid IDs (X806.2.c)
Tax Identification
Number
Barangay
certification
GSIS e-Card
SSS card
Senior Citizen card
OWWA ID
OFW ID
IBP ID
DSWD certification
Seamans book
Alien Certification of
Registration/Immigrant
Certificate of Registration
Government office and
GOCC
Certification from the
National Council on
Disability Affairs
Company IDs issued by
private
entities
or
institutions registered with
or supervised or regulated
by BSP, SEC, IC.
1
3
PROCESS
Other Valid IDs
STUDENTS who are Beneficiaries of
remittances or fund transfers, and not
yet of voting age
Present original and submit a clear copy of 1

valid photo-bearing school ID duly signed by
principal
NON-RESIDENT CUSTOMER
Similar IDs duly issued by the foreign

government where the customer is131
a
resident/citizen
PROCESS
Valid
IDs: Miscellaneous
Provisions
Submission of clear copy of 1 valid

ID on one-time basis at the start of
relationship.
Submission of updated photo/relevant
information based on risk and
materiality
Classification of ID documents
based on reliability and ability to
validate information
132
PROCESS
Valid
IDs : Miscellaneous
Provisions
Acceptance of other IDs provided that it
shall not be the sole means of identification
If ID does not bear photo or it
does not clearly show the
face: CI may use its own
technology to take the photo.
1
3
PROCESS
Exceptions to the Gathering of
Minimum Information
Outsourcing Arrangement (Subsection
X806.2.d)
Trustee, Nominee, Agent or Intermediary
Account (Subsection X806.2.e)
Third Party Reliance
(Subsections X806.2.e.1 and X806.2.e.1.a
and b
134
PROCESS of minimum
Outsourcing
information
( X806.2.d)
Without prior MB approval

May or may not be a CI
Ultimate responsibility is with counterparty
KYC
Record keeping
compliance with conditions
1
3
PROCESS
Trustee, Nominee, Agent or
Intermediary Account ( X806.2.e)
Establish and record the true and full
identity
Determine the true nature of the parties
capacities and duties
Conduct risk profiling and determine the
standard of due diligence to be applied
In case of doubt, apply enhanced due
diligence (Subsection X806.1.b)
136
PROCESS
Politically
Exposed Person Defined
(Section X803 )
An individual who is or has been entrusted

with prominent public positions in the
Philippines or in a foreign state;
Including the following:
heads of state or of government,

senior politicians,
senior national or local government,
judicial or military officials,
senior executives of GOCCs and important
political party officials.
1
3
PROCESSExposed Person
Politically
(X806.2.g )
Covered Institutions shall:

Establish and record the true and full
identity of PEPs as well as their
immediate family members
and the
entities related to them;
Establish a policy on applicable
standard of due diligence taking
into consideration their position
and attendant risks.
138
PROCESStransfer (
Fund/Wire
X806.2.i.)
Minimum safeguards for CIs:

Beneficiary institution shall not accept
pay-out instructions to non-customer
beneficiary unless CDD is conducted.
If originator and beneficiary
are the same person, rules
on 3rd party reliance may be
applied treating originating
institution as 3rd Party.
139
PROCESS
Fund/Wire transfer ( X806.2.i.)
The originating institution shall not accept

instructions to fund/wire transfer from a
non-customer originator, unless CDD is
conducted;
If the originator is also a high
risk customer, beneficiary
institution must conduct EDD
on the beneficiary and the
originator
(CROSS
BORDER
TRANSFERS);
14
0
PROCESStransfer (
Fund/Wire
X806.2.i.)
Beneficiary institution shall refuse to effect

the fund/wire transfer or pay-out whenever:
additional information cannot be obtained
document provided is false/falsified
unsatisfactory validation process
Note:
This is w/out prejudice to the
reporting of a ST to the AMLC when
circumstances warrant.
14
1
PROCESStransfer (
Fund/Wire
X806.2.i.)
Cross border and domestic fund/wire

transfers amounting to P50,000 or more
shall include the following originator
information:
Name of originator.
Address or in its absence national
identity number or date and place of
of originator.
birth
Number
of originator or in its
absence, a unique reference number
must be included.
142
PROCESS
Fund/Wire transfer (
X806.2.i.)
If wire transfer (= > P50,000) is
unaccompanied by originator information,
beneficiary institution shall:
Exert all efforts to establish true and full
identity of originator by requiring additional
information from the originating institution
or intermediary institution.
Apply EDD
143
PROCESS
Buyers
of CC, MC, or CC (
X806.2.j.)
May be sold only to existing customers
Maintain a register indicating the
following info:
True and full name of buyer or applicant if
buying on behalf of an entity
Date of issuance and number of the check
Account number
Name of the payee
Amount
Purpose of such transaction
144
PROCESS
Buyers of CC, MC or CC Other than
Existing Customer ( X806.2.j.1)
Covered Institution shall:
Obtain information required in X806.2.j. and
identification
documents
and
minimum
information to establish true and full identity
and existence of applicant.
Apply
EDD
where
circumstances warrant, but in
no case shall reduced due
diligence shall be applied.
14
5
PROCESS
Buyers
of CC, MC or CC in Blank or Payable
to Cash, Bearer
(X806.2.j.2.)
or
Numbered
Account
Allowed subject to the following

conditions:
Amount of each check shall not exceed
P10,000
Buyer of check is properly identified
Maintain register indicating the data in
X806.2.j
Ensure that instruments are not being used/resorted to
by buyer or depositor in furtherance of a money

laundering activity
If deposited: Also subject to the same requirements of
scrutiny applicable to cash deposits
Reported to AMLC if there is a reasonable ground to
suspect that said transactions are being used to launder
funds of illegitimate origin.
14
6
PROCESS
FX Dealers/ Money Changers/
Remittance Agents ( X806.2.l.)
Require
customers to
submit copy
of BSP issued
certificate of
registration
Certificate for
each head
office, branch,
agent, subagent,
extension office
or business
outlet.
Apply EDD
for customers
presenting
greater risk.
14
7
PROCESS Accounts (
Numbered
X806.2.o.)
PH and FX currency non-checking numbered
accounts are allowed PROVIDED, true and full

identity and existence of customers are
established
Accounts
existing
prior
to
17
October 2001 shall continue to exist
PROVIDED, true and full identity and
existence of beneficial owners of such
accounts were established
Apply EDD in accordance with
Subsection X806.1.b.
14
8
PROCESS
Prohibited accounts
(X806.2.p.)
anonymous accounts
accounts under fictitious names
numbered checking accounts
and all other similar accounts
Maintain accounts only in the true and full

name of the account owner.
14
9
On-going
monitoring of customers,
PROCESS
accounts
and
transactions
X806.3)
(Subsection
Updating of identification information and

documents is based on materiality and
risk.
A system that can recognize
the normal and reasonable
account
activity
of
customers
and
detect
unusual
or
suspicious
patterns of account activity.
15
0
D. RECORD KEEPING
(Section
X808)
Undertake the necessary
security
measures
to
confidentiality.
Prepare and maintain
documentation
to
enable the AMLC and/
or
the
courts
to
establish an audit trail.
adequate
ensure
15
1
D. RECORD KEEPING
(Section X808)
Identification
records:
Maintained and safely stored
as long as the account is
active.
Transaction records: Maintained
and safely stored for 5 yrs.
from date of transaction.
15
2
D. RECORD KEEPING
Money Laundering Case filed in

Court
( X808.2.)
Retained beyond the five
retention period
Until confirmed that
the case has been
finally resolved or
terminated by the
court.
(5)
year
15
3
D. RECORD KEEPING
Safekeeping of records and

documents ( X808.3.)
Designate at least 2 officers, jointly
responsible and accountable.
Make documents and records available
without delay during BSP examinations.
Retain originals or copies in such forms
that are admissible in court.
15
4
D. RECORD KEEPING
Closed Accounts (
X808.1)
Preserve and safely store:

Records on customer
identification
account files
business correspondences
At least five (5) years from date of
closure
15
5
E.AML TRAINING PROGRAM

(Sec. X809)
Annual
Efficient
Adequate
Continuous
15
6

(Sec. X809)
Includes
Includes awareness
awareness of
of respective
respective duties
duties and
and
responsibilities
responsibilities under
under the
the MLPP
MLPP
Customer identification process;
Record keeping requirements;
CT and ST reporting; and
Internal processes - chain of command
for the reporting and investigation of
suspicious and money laundering
activities.
15
7

(Sec. X809)
Comprises of various focuses

for different line of work
Provide
regular
refresher
trainings
Compliance Office is the custodian of AML
training program and records
To be made available during periodic or
special BSP examination.
15
8
F.ENFORCEMENT ACTIONS
Sanctions and Penalties
(Section X811)
Violation of UARR constitutes major
violation
BOD, SM and line officers are
subject to enforcement actions and
monetary penalties
159
F. ENFORCEMENT ACTIONS
Sanctions and Penalties
(Section X811)
Monetary penalties
Enforcement actions
Written reprimand
Suspension or removal from office
Disqualification from holding any
position in any CI
160
AML Risk Rating System

Discussion Outline
Authority of BSP to issue the ARRS
Overview of the ARRS
Composite Ratings
Component Ratings
Enforcement Actions
Authority of BSP to Issue the ARRS
1
6
Authority of BSP to issue ARRS
Authority of BSP to issue ARRS
Principle 19 of the Basel Core

Principles of Effective Banking
Supervision
Encourages supervisors to do the
Encourages supervisors to do the
following:
Develop and maintain a thorough

understanding of the operations of individual
banks, banking groups and the banking
system as a whole
Strengthen regulatory and supervisory
framework to improve risk management and
corporate governance of banks and
empower BSP to monitor, intervene and
enforce corrective actions
165
Monetary Board Approval

On 2 March 2012, the
Risk
Rating
System
(ARRS) was approved
for implementation by
the Monetary Board
under Resolution No.
362 .
166
BSP Issuance - ARRS
Memorandum to
All BSP Covered
Institutions No.
2012-017 dated 4
April 2012
167
What is the ARRS?

A necessary consequence of
a risk-based approach to
supervision.
Not intended to add to the
regulatory burden of BSP
covered persons (CPs) or
require additional policies or
processes.
Consistent with Principle 19
of the Basel Core Principles
of Effective Banking
Supervision.
1
6
What is the
ARRS?supervisory tool and
An effective
internal rating system to determine if

risk management policies and
practices and internal controls of a CP
to prevent ML/TF are in place, well
disseminated and effectively
implemented.
It enables assessment of all CPs in a
comprehensive and uniform manner.
It aids to direct the focus of
supervisory attention on entities
exhibiting inefficiencies in managing
AML Risks.
169
Overview of the Rating System

A CP is assigned a Numerical and Adjectival
composite rating based on four (4)
components, to wit:
Sound AML policies and
Efficient BOD and procedures embodied in a BODSM oversight
approved Money Laundering
(MANAGEMENT
and Terrorist Financing
)
Prevention Program (MLPP)
Robust internal
controls and audit
(CONTROLS AND
AUDIT)
Effective implementation
(IMPLEMENTATION)
Composite Ratings
171
Composite Ratings
Highest rating of 4 indicates strongest RMS
and most effective operational practices
that entail the least degree of supervisory
concern;
Lowest rating of 1 signifies weakest RMS
and defective implementation which
requires highest degree of supervisory
concern and may place the CP within the
framework of PCA.
172
Composite 4 - SOUND
OVER-ALL FRAMEWORK
High level of RM and control
Risk and control framework is clearly
defined and fully compatible with
the nature and complexity of the
institutions activities.
COMPONENT RATINGS
All or most of its component ratings are
4 with no component rating below 3.
Composite 4 - SOUND
CAPACITY TO WITHSTAND
RISKS
Most capable of withstanding ML
risks and is unlikely to be used as
ML conduit for the proceeds of
unlawful activities.
ENFORCEMENT ACTION
NONE
174
Composite 3 - ADEQUATELY SOUND

OVER-ALL FRAMEWORK
Acceptable level of risk management and
control with minimal supervisory concern.
The risk management and control
framework is adequately defined and
sufficiently compatible with the nature and
complexity of the institutions activities.
COMPONENT RATINGS
All or mostly 3 but no component rating less
than 2.
175
Composite 3 - ADEQUATELY SOUND

CAPACITY TO WITHSTAND RISKS
Can withstand any associated AML risks and
there is low probability of it being used as a
money laundering conduit for the proceeds
of unlawful activities.
ENFORCEMENT ACTION
NONE
176
Composite
2
VULNERABLE
OVER-ALL FRAMEWORK
Risk Management and

Control needs improvement
and requires more than
normal supervision
Risks are insufficiently
controlled and mitigated,
leaving too high a residual
risk for the institution
The risk management and
control framework is poorly
defined or insufficiently
compatible with the nature
and complexity of the
institutions activities.
COMPONE
NT
RATINGS
All or
mostly 2
177
Composite 2 - VULNERABLE
CAPACITY TO
WITHSTAND RISKS
Vulnerable to AML
risks and may be
used as money
laundering conduit
for the proceeds of
unlawful activities.
ENFORCEMEN
T ACTION
Warning to
written
reprimand.
Monetary
penalties may
be imposed on
a one-time
basis.
Composite 1 - GROSSLY
INADEQUATE
OVER-ALL FRAMEWORK
Risk management needs drastic and/or
immediate improvement which requires
close supervisory attention. Risks are not or
inadequately mitigated and poorly
controlled. The risk management and
control framework is neither defined nor
compatible with the nature and complexity
of the institutions activities.
COMPONENT RATINGS
All or mostly 1
Composite 1 GROSSLY
INADEQUATE
CAPACITY TO WITHSTAND RISKS
Not capable of withstanding AML risks and
may likely be used as a conduit for the
proceeds of unlawful activities.
ENFORCEMENT ACTION
Warning, written reprimand or suspension.
Monetary penalties may be imposed
computed from date of notice until the
improvement is satisfactorily effected
MANAGEMENT
RATING
COMPONENT
COMPONENT RATING
Numerical
4
3
2
1
Overall
Strong Adequa
Less
Weak
te
and
than
Oversig
efficient oversig adequat
ht
ht
oversig
e
ht
SubAll or
All or
All or
All or
componen mostly mostly mostly 2 mostly
ts
4, no < 3, no <
1
3
2
MANAGEMENT SUBCOMPONENTS
SUB-COMPONENTS RATING
Numerical
Management
of MLPP
(Ability of CO)
High Level,
minor
violations
Acceptable
level,
minimal
violations
Less than
acceptable,
moderate
violations
Low ability,
excessive
violations
MIS (reliable,
timely ,
complete,
helpful)
High Level
Satisfactory
Less than
satisfactory
Low level of
reliability
RM Practices
(consistent
and effective)
High Level
Satisfactory
Less than
satisfactory
Low level
Selfassessment
systems
(independent,
accurate and
useful
High Level
Adequate
Less than
Adequate
Low level
182
MLPP COMPONENT RATING

Numerica
l
Overall
COMPONENT RATING
4
3
Sound, Satisfactor
Less
appropria y, proper
than
te
satisfact
ory
SubAll or
All or
All or
componen mostly 4, mostly 3, mostly 2
ts
no < 3
no < 2
1
Deficie
nt
All or
mostly
1
183
MLPP SUBCOMPONENTS
Numerical
Coverage of
MLPP (As to
AMLA, RIRR and
UARR)
Comprehens
ive covers
all
Significantly
covers all
Needs
improveme
nt, lacks
some major
provisions
Deficient,
majority of
provisions
not indicated
RM Practices
All
identified,
incorporated
Most
identified,
adequately
incorporated
May be
identified,
inadequate
ly
incorporate
d
Deficient, not
identified,
not available
Dissemination
of MLPP and
Level of
awareness
Disseminate
d to all, Full
awareness
Disseminate
d to most,
Reasonable
awareness
Disseminat
ed only to
some,
needs
improveme
nt
Poor
disseminatio
n and
awareness
184
INTERNAL CONTROL AND

AUDIT
COMPONENT RATING
COMPONENT RATING
4
3
2
Numerica
1
l
Overall
Robust Satisfacto Less than Deficie
ry
satisfacto
nt
ry
SubAll or
All or
All or
All or
component mostly mostly 3, mostly 2 mostly
s
4, no <
no < 2
1
3
185
INTERNAL CONTROL AND AUDIT

SUBCOMPONENTS
Numerical
Satisfactorily
independent,
Sufficient
support
Less than
satisfactor
y
independe
nce and
support
Lacks
independence
and
support
Significant
coverage
Needs
improvem
ent
Deficient
Prompt,
Within
immediate reasonable
ly
time
undertake
n
Needs
improvem
ent
Poor,
delayed
Independen Fully
ce and
independe
Support
nt, total
support
Coverage
Timeliness
Comprehe
nsive
186
EFFECTIVE IMPLEMENTATION
COMPONENT RATING
Numerica
l
Overall
COMPONENT RATING
4
3
2
High
Acceptab
Needs
le
improvem
ent
SubAll or
All or
All or
component mostly mostly 3, mostly 2
s
4, no < no < 2
3
1
Poor
All or
mostl
y1
187
COMPONENT SUBCOMPONENTS
Numerical
4
3
2
Risk-based Sound
Adequate Needs
and Tiered
improvem
Customer
ent
acceptance
and
identificatio
n
On-going
Robust
Acceptab Needs
Monitoring
le
improvem
ent
CTR
Sound
Satisfact Less than
Reporting
ory
satisfactor
system
y
1
Deficient
Deficient
Poor
188
COMPONENT SUBCOMPONENTS
Numerical
4
3
2
STR
Sound Satisfact Less than
Reporting
ory
satisfactor
System
y
Record
High
Adequate Needs
Keeping and
improvem
retention
ent
system
Continuing High
Adequate Needs
education
improvem
and Training
ent
Program
1
Poor
Poor
Weak
Enforcement Action
Compos
Enforcement Action
ite
Rating
4 and 3 No Enforcement Action
2 and 1 Written Action Plan approved
by BOD, for submission to the
AMLSG.
AMLSG assesses the viability
of the Plan and monitors
implementation
1
Considered an Unsafe and
unsound banking practice.
Enforcement Action
non-submission of acceptable
WRITTEN ACTION PLAN within
deadline, or
failure
to
implement
the
WRITTEN ACTION PLAN,
Enforcement
actions
under
Circular No. 706 shall be
recommended on the covered
person and its responsible
officers including monetary
penalties to be computed on a
daily basis.
191
MODULE 3: COVERED AND

SUSPICIOUS
TRANSACTIONS
Covered
and
Suspicious
Transaction
X807)
Reporting
(Section
Submitted to the AMLC within ten (10)

working days from occurrence thereof
Transactions which both a covered and
suspicious are reported as a suspicious
transaction.
192
MODULE 3: COVERED AND

SUSPICIOUS TRANSACTIONS
BSP Memo # 2013-0151
States that AMLC registration procedures
for CIs are available at www.amlc.gov.ph
Requires CIs to immediately register with
AMLC to facilitate reporting of CTR and
STR.
193
Covered Transaction
A transaction in cash or
other
equivalent
monetary
instrument
involving an amount in
excess of P500,000.00
within one (1) banking
day.
C.COVERED AND SUSPICIOUS

TRANSACTIONS
No underlying legal or trade obligation,

purpose or economic justification;
The client is not properly identified;
The amount involved is not commensurate
with the business or financial capacity of
the client;
195

TRANSACTIONS
The clients transaction is structured in

order to avoid being the subject of reporting
requirements;
The transaction is in any way related to an
unlawful activity or any money laundering
activity or offense or
196

TRANSACTIONS
Any circumstance relating to the transaction

which is observed to deviate from the
profile of the client and/or clients past
transactions;
Any transaction that is similar or analogous
to any of the foregoing.
197

TRANSACTIONS
STR or Not
A domestic helper pawned a rolex watch

worth P1 million, she has not declared other
source of income;
A suspicious looking man sent money to
Basilan, Maguindanao and Sulu allegedly
for salaries
of their company, he
presented a company ID which showed he
is a messenger.
198

TRANSACTIONS
STR
or Not
Jose filed
for a payout as beneficiary of
various remittances from abroad. Per his ID

he is a resident of Quezon City but is
cashing
out
in
Cotabato
City.
His
explanation on the circumstances is
evasive.
199

TRANSACTIONS
Deferred reporting
Circular Letter No. CL-2013-011 dated 2

6 Feb 2013
Adopted AMLC Resolutions No. 10 and 10-A both
dated 24 January 2013
Superseded the AMLC Resolution Nos. 58 and
24, dated 25 June 2005 and 18 March 2009,
respectively.
Partly X807.1.)
Increased the number of no/low risk covered
transactions from six to thirteen.
200

TRANSACTIONS
Addtl
Covered Transactions subject to deferred
reporting
AMLC Resolution No. 10 dated 24 January 2013:
1. Transactions between BSP supervised CI and the BSP;
2. Transactions between banks operating in the Phils.;
3. Roll-overs of placements of time deposit and/or other
clients investment
4. Transactions involving transfer of funds from one
deposit account to another deposit account of the same
person within the same bank
5. Bank-initiated (transactions of the bank) or system
generated transactions
i. Internal operating expenses and capital expenditures
of CIs;

TRANSACTIONS
Addtl Covered Transactions subject to deferred

reporting
AMLC Resolution No. 10 dated 24 January
2013:
ii. Remittance by a bank, acting as a collecting
agent, of taxes and other government fees
collected from the public, to the Bureau of Internal
Revenue and other government agencies;
iii. Remittance by a bank, acting as collecting
agent, of customers bills and payment (e.g.
utilities);
iv. Adjusting entries or reclassification of accounts;

TRANSACTIONS
Addtl
reporting

2013:
v. Service fees, proprietary revenue fees,
arrangement fees, loan syndication fees and other
form of fees incidental to loans granted or
investments sold, provided that the loans granted
or the sale of investment was reported at gross or
at its principal amount; and
vi. Investments of covered institutions in
government securities, or in companies listed in
the local or international Stock Exchanges.

TRANSACTIONS
Addtl
reporting

6. Payment of loan and/or its corresponding interest
regardless of the manner of payment (cash, fund
transfer, debit of account, check), provided that the
grant of loan was previously reported as covered
transaction;
7. Reclassification of loan to Real and other Properties
Acquired (ROPA); provided that the loan availment was
previously reported;
8. Installment of partial payment in the sale of ROPA,
provided that the total selling price of the ROPA in
excess of P500,000.00 was reported at the time of the
execution of the contract to sell or sales contract
receivable, or deed of sale;

TRANSACTIONS
Addtl
reporting

9. Loan repricing, loan renewal, loan restructuring, provided
that there is no change in borrowers name, otherwise,
the loan shall be considered as new loan, hence,
reportable;
10. Transactions of the Trust department of a bank:
i. Investment/divestment of Unit Investment Trust Fund
(UITF) and Trust and Other Fiduciary Activities (TOFA);
ii. Investment/divestment of Investment Management
Account (IMA), such as Special Deposit Account,
government securities, equities traded in the Philippines
Stock Exchange, real estate properties, and deposits
with own bank or other banks, and loans granted;

TRANSACTIONS

reporting
10. Transactions of the Trust department of a bank:

iii. Rollover of Investment of UITF, TOFA, and IMA,
provided that the initial contribution or placement was
previously reported. Any redemption, termination, or
cancellation of investment resulting in the closure of the
trust account of a client shall be reported;
11. Transaction of government agencies with banks,
except the following:
i. Disbursements of government agencies that passed
through the Modified Disbursement Scheme (MDS),
which

TRANSACTIONS

reporting
11. Transaction of government agencies with banks, except

the following:
cont. disbursements are payable to private entities; nongovernmental
organizations
(NGOs);
non-profit,
charitable or religious foundation; or to individual
persons;
ii. Disbursement of government agencies coursed
through other depository banks, other than the MDS
accounts, that are payable to private entities; nongovernmental
organizations
(NGOs);
non-profit,
charitable or religious foundations; or to individual
persons;

TRANSACTIONS

reporting
2013:
12. Agrarian Reform Receivables;
13. Payment for agricultural lands
Agrarian Reform Law.
under
the
Government agency refers to any of the various

units of the Government, including a department
bureau, office, instrumentality, or governmentowned or controlled corporations, or a local
government or a distinct unit.

TRANSACTIONS
Electronic
Monitoring System (
X807.2)
MINIMUM:
Detect
transactions/accounts that qualify as
CTs or STs.
AUTOMATED FUNCTIONALITIES
CT/ST transaction monitoring

Watch list monitoring
Investigation
Generate accurate and complete CTRs
209

TRANSACTIONS
Electronic Monitoring System (
X807.2 )
AUTOMATED
FUNCTIONALITIES
(Continued)
Aggregating activities of a customer with
multiple accounts
Complete audit trail
Record all STs and support
investigation of alerts
210

TRANSACTIONS
Manual Monitoring ( X807.3)
CIs (other than UBs and KBs) must have a
system
of
flagging
and
monitoring
functionalities.
Register of all STs brought to the attention of
SM whether or not the same has been
reported with the AMLC.
21
1
Compliance is our key role..

It is time to get rid of the concept
that
AML is costly and non-profitable.
Hue Dang,
ACAMS
Head, Asia Chapter

AMLA

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AMLA Seminar for

Module 1 Introduction/Amendments to AMLA

Sec. 9(c) Reporting of Covered and

Covered persons shall report to the

Sec. 11 - AMLC Authority to

Sec. 11 - AMLC Authority to

Sec. 11 - AMLC Authority to

Sec. 11 - AMLC Authority to

No case filed against person whose

A person whose account has been frozen

AMLC Authority to Freeze

Duty of Covered Persons

Other Offenses under

Other Offenses under

communicating directly or indirectly,

Neither may such reporting be published or aired

AMLSG Core Functions

Elements of the Crime of

Transaction refers to any act

Financial Action Task

Non-Cooperative Countries and

MONEY LAUNDERING SCHEME IN THE

The AML Act and its

Revised Implementing Rules and

R.A. No. 10167

RELATED ACCOUNTS under the

Salient Features RA No.

Salient Features RA No.

Salient Features RA No.

Money Laundering Offense

WHO: Any person, knowing that any MI or property

Money Laundering Offense

WHO: Any person, knowing that any MI or

e. Aids, abets, assists in or counsels

Money Laundering Offense

Any act or omission or series or

Unlawful Activity (Predicate

Swindling under Art. 315, RPC

Unlawful Activity (Predicate

Bribery and corruption of Public

Unlawful Activity (Predicate

Unlawful Activity (Predicate

Violation of The Anti-Car napping Act of 2002,

Unlawful Activity (Predicate

Excludes lawyers and accountants who act as

Freeze Orders (FO)

The Updated AML Rules and

Legal Basis of UARR

Protect and preserve the integrity

Ensure that the Philippines shall

Salient Features of UARR

Salient Features of UARR

Salient Features of UARR

Salient Features of UARR

Prescribed guidelines when applying

Salient Features of UARR

Salient Features of UARR

Salient Features of UARR

A.RISK MANAGEMENT (Sec.

BOD and SM Oversight (

Alert SM, BOD, or committees of failure

Procedures on customer identification

Monitoring and Reporting Tools